Oaktree initially formed the U.S. Senior Loan strategy in September 2007 to capitalize on the backlog of "hung" bridge loans held by investment banks. The strategy typically invests in broadly-syndicated, senior-secured loans or other senior, non-investment-grade debt. In most instances, the instruments we target constitute the most senior component in the borrower’s capital structure. In 2012, we continued to expand the strategy with a new product, Enhanced Income, which invests in senior loans through a lightly-levered CLO structure; and in 2014, we launched a traditional CLO product.
"We employ a fundamental, bottom-up credit analysis when approaching potential loan investments,” says portfolio manager Armen Panossian. “As a part of this analysis, we rely on downside sensitivities in our models and a proprietary credit scoring matrix that has been successfully applied by our high yield bond team since 1986. Our emphasis is on capital preservation and strong collateral coverage, collaborating with other investment teams across Oaktree’s broader credit platform to maximize the potential of our investments."
The strategy’s focus is on U.S. dollar-denominated loans secured by first-priority liens in performing companies primarily within the U.S. and Canada, but also within Europe. Though it is less common, we may also invest in second lien loans, non-dollar-denominated loans, and secured or unsecured bonds, where we believe the value of the underlying business comfortably exceeds the value of our claim in a downside scenario.